In a report released today, Michael Legg from Benchmark Co. reiterated a Buy rating on Turning Point Brands (TPB – Research Report), with a price target of $34.00.
Michael Legg has given his Buy rating for Turning Point Brands (TPB) due to a combination of factors. The company has reported stronger than projected third-quarter margins, compensating for the slightly lower sales. TPB also managed to increase its profits despite restructuring its Consumer Products Division (CDS) to exclude certain loss-making businesses and focus on a more selective product range. The Gross Profit margin rose to 50.7%, higher than the anticipated 48.7%, and the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the quarter was $24.2 million with Free Cash Flow (FCF) of $11.3 million. This comprehensive financial performance indicates that TPB has sufficient cash to meet its upcoming financial obligations.
Additionally, Legg acknowledges TPB’s promising new product, Fre, which is targeting a $1 billion market growing at a rate of 40% to 50%. The company has seen growth in its B2B Alternative segment, witnessing an increase in the number of customers and orders, as well as a rise in the average order size. The company’s stock currently trades at 9 times its 2024 earnings per share (EPS) of $2.58, and Legg’s target price of $34 is based on 13 times the 2024 EPS, which aligns with the stock’s historical trading pattern. Despite risks such as economic instability, industry regulation, and potential loss of key suppliers, Legg’s analysis maintains a positive outlook for TPB.
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Turning Point Brands (TPB) Company Description:
Turning Point Brands, Inc. provides tobacco products. It operates through following segments: Smokeless products, Smoking products and NewGen products. The Smokeless products segment manufactures and markets moist snuff and contracts for and markets chewing tobacco products. The Smoking products segment imports and markets cigarette papers, tubes, finished cigars, NYO cigar tobaccos and cigar wraps and processes, packages and markets pipe tobaccos. The NewGen products segment markets e-cigarettes, e-liquids, vaporizers, and other related products and distributes a wide assortment of vaping products to non-traditional retail outlets via VaporBeast and Vapor Shark. The company was founded by Thomas Helms, Jr. in 1988 and is headquartered in Louisville, KY.
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